Frequently Asked Questions: #fdicompany

Setting up a business in Indonesia offers several benefits for foreign investors:

• Large and Growing Market: Indonesia is the largest economy in Southeast Asia with a population of over 270 million, providing access to a vast consumer base.

• Strategic Location: Positioned at the crossroads of the Pacific and Indian Oceans, Indonesia offers excellent access to other Asian markets.

• Rich Natural Resources: The country is abundant in natural resources, including oil, gas, minerals, and agricultural products.

• Young Workforce: Indonesia has a large, young, and increasingly skilled workforce, providing a valuable talent pool for businesses.

• Improving Infrastructure: Ongoing infrastructure development is enhancing connectivity and logistics across the archipelago.

• Economic Stability: Indonesia has maintained relatively stable economic growth over the past decades.

• Government Incentives: The government offers various incentives for foreign investors, including tax holidays and allowances in certain sectors.

• Digital Economy Growth: Rapid adoption of digital technologies is creating new business opportunities, especially in e-commerce and fintech.

• Tourism Potential: Indonesia’s diverse culture and natural beauty make it a prime destination for tourism-related businesses.

• ASEAN Membership: As part of ASEAN, Indonesia provides access to a broader regional market through various free trade agreements.

• Improving Ease of Doing Business: Recent reforms have aimed at simplifying business processes and reducing bureaucracy.

• Cultural Diversity: The country’s cultural richness can be leveraged for various business opportunities, from creative industries to niche markets.

Before proceeding with any investment plans, it’s crucial to consult the Positive Investment List (Perpres 10/2021 jo. 49/2021) to confirm the conditions applying to your intended business activity — most sectors are now fully open to foreign investment, though a small number remain closed, conditional, or reserved for partnership with MSMEs.

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Foreign investment restrictions in Indonesia are governed by the Positive Investment List (Presidential Regulation No. 10/2021, as amended by No. 49/2021), which in 2021 replaced the old Negative Investment List (DNI). The default is now openness: all sectors are open to 100% foreign ownership unless specifically listed. Key points to consider:

• Sectors are categorized as:

  • Fully open to foreign investment (the default — most sectors)
  • Open with conditions (e.g., maximum foreign ownership percentage, special licenses)
  • Reserved for, or requiring partnership with, Indonesian cooperatives and MSMEs
  • Closed to investment entirely (a small list)

• Sectors closed to investment include:

  • Gambling and casinos
  • Cultivation of class-I narcotics
  • Capture of protected and endangered species, and coral extraction
  • Chemical weapons production
  • New investment in the alcoholic beverage manufacturing industry

• Conditions in the remaining restricted sectors can involve:

  • A maximum foreign ownership percentage (e.g., postal services, domestic air transport)
  • Partnership or reservation requirements protecting local MSMEs
  • Location-specific rules (special economic zones may have different treatment)
  • Additional sectoral licensing requirements

• Business activities are defined by 5-digit KBLI classification codes selected during registration in the OSS (Online Single Submission) system, which checks Positive Investment List compliance automatically.

• Several hundred priority sectors qualify for investment incentives such as tax holidays, tax allowances, and customs facilities.

• The Ministry of Investment and Downstream Industry (BKPM) provides guidance on interpreting the list for specific business activities.

• Even in fully open sectors, foreign-owned companies must meet PMA capital requirements (investment plan above IDR 10 billion per KBLI per location; paid-up capital of at least IDR 2.5 billion) and any risk-based licensing conditions.

Always consult with legal experts or investment advisors familiar with the latest Indonesian regulations to ensure compliance with current foreign investment conditions.

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